"You can't kill a fair in a year", was the comment made by Chris Gaggo, a vendor who was in Building 10 during the 2009 Orange County Fair.
During the meeting of the Orange County Fair and Events Center (OCFEC) on August 27, a 60% unannounced rent increase for vendors, the possible sale of the fairgrounds, the so-so performance of the just ended fair, and discontent with current management were discussed. This is the first part in a series which discusses issues brought up during the August 27, 2009 meeting of the OCFEC Board of Directors.
60% Unannounced Rent Increase for Vendors
Many vendors found themselves with an unexpected rent increase that they had never been informed of until after a contract was signed and a new invoice received. Vendors commit to shows months in advance. This year, vendors received their contracts in January to March with the 2008 pricing on the contract. The vendors committed to do the show at the 2008 price. Several months later, some of the vendors received an invoice increasing the rent by as much as 60% over and above 2008. The vendors were told by Fair management that they had to pay that invoice or they would not be able to exhibit at the 2009 OC Fair. The vendors either paid the invoice outright, or made arrangements to pay, because they did not have time to book another show and did not want to risk losing over a month of revenue during the valuable summer season.
How did this happen? There was a series of events which show a lack of oversight and sufficient management of some of the business affairs of the OCFEC.
Rental Prices Increased in 2009 Budget
For many years, the OC Fair charged the same amount for a 10 ft by 10 ft (10X10) exhibit space as for a 10 ft by 20 ft (10X20) space. Vendors using electricity were not assessed an additional charge above space rent for electricity. Vendors who use canopies and awnings also were not assessed additional charges for those items. The 2008 pricing reflected this pricing policy.
During preparation of the 2009 budget in late 2008, OCFEC management decided that 2009 was the year to address the 10X10 vs. 10X20 pricing issue, along with cost of electricity, awnings and canopies. A new pricing schedule was made which increased the price for a 10X20 space, added an electricity surcharge, and an awning/canopy surcharge. The price increase was reflected in the budget for the year 2009. The OCFEC board met, reviewed and approved the budget including the pricing increases.
Contracts Sent Out with 2008 Pricing
In early 2009, vendors reported that they started receiving contracts for the 2009 Orange County Fair which kept their rent payments at 2008 levels. The vendors signed the contracts, budgeted money for rent at 2008 levels, and did not take any other commitments during the window of the set up, operation and tear down of the 2009 Orange County Fair. Vendors also bought merchandise and determined prices using the 2008 rent numbers.
Several vendors report that beginning in March 2009 they were told that they needed to sign new contracts with a 60% price increase or risk losing their space. At that time, many vendors had no alternative but to sign the contract with the unannounced price increase because they had no other place to sell their goods and services. The vendors had made commitments to the OC Fair and now the OC Fair was breaking their commitments to them.
When vendors questioned the sudden rent increase, management did not investigate on their end. Managers dealing vendors pressed on the vendors. No information came from OCFEC management about why the increase was happening then, just a few months before the OC Fair was set to open.
Steve Beazley Wants a Vacation Before He has to Refund the Overcharges
Board Chair Julie Vandermost listened to the problems with the rent increase and directed that vendors who had been overcharged compared to 2008 rates be refunded the difference immediately. The only additional charges allowed will be for the two days added to the length of the OC Fair in 2009 vs. 2008.
Fair CEO Steve Beazley asked if the refund could wait until after his vacation. Chair Vandermost directed staff to process the refunds as quickly as possible, without regard to CEO Beazley's vacation.
CEO Beazley's comment shows a lack of understanding of his vendor base. The vendors at the OC Fair are small businesses, which are very cash flow dependent. Many of these vendors travel between fairs during the year, which creates times when cash is flowing because sales are being made and times when cash is not flowing because the mobile business is being moved, set up or torn down for transport.
A fair CEO like Beazley should be aware of the economics and basic business practices of the vendors the OC Fair relies on to bring in visitors and revenues. Space rental fees are one source of revenue for the OC Fair. The other source is the percentage of sales the vendors pay for exhibiting at the fair. Vendors pay a a fraction of sales ranging from 20% up to 55% for the right to sell at the fair. The high tax for selling at the fair is passed along to fair attendees in the form of $6 hamburgers (fries extra) and $11 cups of beer.
Now, How Did This Actually Happen?
The managers in charge of booking vendors for the 2009 OC Fair believed that they had the authority to increase prices to the levels outlined in the 2009 budget even though the OCFEC Board had not approved a rate increase.
Additionally, a new rate card, showing the increased rents for 10x20 spaces, electrical service surcharge and awning/canopy surcharge was not created. The 2008 rate card was kept in use and sent to the 2009 vendors.
Starting in January 2009, vendor contracts were sent out. Vendors could apply to exhibit at the OC Fair until mid-January 2009. Once a vendor is accepted at a venue, they commit to that venue and don't continue searching for a venue to sell at during that same period of time. The contracts had 2008 pricing.
Vendors signed and returned the contracts. Several months later, in March 2009, the vendor contracting management noticed the errors in the contracts and required vendors to sign new contracts with the unannounced 2009 rate increase presented only in the 2009 budget.
Doug Lofstrom, Vice President of Events for OCFEC, took full responsibility for the failure of management in this critical area. Lofstrom was promoted to Vice President of events in October 2008. At that time CEO Beazley described Lofstrom's promotion and reorganization of OCFEC staff, "The commitment remains that any re-organization will always be in the service of working smarter through the right people working on the right things in the right alignment."
Becky Findley sure ran things nice. Sure wish we could bring her back. I mean, all other fair boards campaigned to stop the sale of their fairgrounds. This fair board campaigned to have it go to the highest bidder. Plus, they want the management of the fair to be a total black box.
Posted by: JT | 11/30/2009 at 05:22 PM